A.M. Best Affirms Rating of Consumer Insurance Services Limited and Removes From Under Review; Assigns Issuer Credit Rating.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A- (Excellent) of Consumer Insurance Services Limited (CISL) (New Zealand) and removed the rating from under review. A.M. Best has also assigned an issuer credit rating of "a-" to CISL. The outlook for both ratings is stable.

The ratings reflect CISL's favorable underwriting experience, consistently strong operating performance, liquid investment portfolio, distribution support from parent entities and its recent capital injection.

Over the last few years, CISL has consistently achieved a strong underwriting performance with very favorable claims experience. The increase in operating earnings in 2005 was underpinned by both favorable underwriting results and a stable investment yield.

The company improved its loss ratio to 17% in 2005 from 22% in 2004, demonstrating the good quality of its insurance portfolio. Despite a slightly higher expense ratio, CISL's combined ratio declined to 68%.

Going forward, CISL--a member of the Fisher and Paykel (F&P) group--will continue to benefit from operational synergies in generating good quality of business through the lending activities of F&P Finance.

CISL has a liquid and prudent investment portfolio to support its short-tailed liability. At fiscal year-end 2005, money market deposits accounted for more than 74% of CISL's total assets.

Offsetting factors include the high dividend payout requirement, significant risk of business concentration in the consumer credit insurance market and the expected deterioration of capitalization on a risk-adjusted basis.

Although the company is no longer a part of the guaranteeing subsidiaries of F&P Finance, it is obligated to return no less than 90% of its after tax profits to its parent. The company's dividend payout averaged 101% over the past five years. Ongoing capital repatriation by its parent could limit CISL's growth potential.

The continued premium growth is expected to exacerbate the company's risk-adjusted capitalization as measured by Best's Capital Adequacy Ratio (BCAR), notwithstanding the two capital infusions of NZD 1.5 million (USD1.1 million) in 2004 and 2005. Nevertheless, CISL's BCAR in 2005 still indicates an adequate margin.

Prospectively, given its heavy concentration on consumer credit insurance business, the lending activities in New Zealand's consumer loan markets will determine the sustainability of CISL's growth. A.M. Best remains cautious about CISL's exposure to the cyclical nature of the consumer loan market and its impact on the stability of the company's operating earnings.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at www.ambest.com.